I have a lot of investments in AI – should I move them into cash?

In our weekly series , readers can email any questions about their finances to be answered by our expert, Rosie Hooper. Rosie is a chartered financial planner at Quilter Cheviot and has worked in financial services for 25 years. If you have a question for her, email us at money@inews.co.uk .

Question: Is it worth reducing my investments to have more money in cash or bonds ahead of a potential AI bubble popping? I have a fair amount in artificial intelligence and am worried this could be a mistake.

Answer: The excitement around artificial intelligence has been a powerful driver of recent market performance, and it is something that is coming up in almost every client conversation at the moment. It is entirely understandable.

Shorts

When one theme seems to dominate both headlines and market returns, it is natural to wonder whether you should be doing something differently.

In those situations, I often find myself coming back to what sounds like a cliché point, but one that remains true, successful investing is about time in the market, not timing the market. A good financial plan starts with your long-term goals, and any changes to your investments should be driven by those goals rather than short-term market narratives.

While AI-related companies have accounted for a large share of recent returns, and a relatively small group of large US technology firms now make up a significant proportion of global indices, that on its own does not tell us what happens next.

Periods of strong performance often lead to more attention and more money flowing into an area, and it is quite normal to see a wide range of views on whether valuations are justified.

The difficulty for investors is that there is no reliable way to predict if, how or when sentiment might shift. Markets can stay at elevated levels for longer than expected, and reacting too quickly can mean missing further growth as well as avoiding potential losses.

Rather than trying to second-guess the direction of markets, it is usually more productive to focus on whether your portfolio still reflects your personal circumstances.

That means looking at how well diversified your investments are across sectors, regions and asset classes, and making sure you are not overly reliant on a small number of companies or themes.

It also means thinking carefully about your timeframe. If you are approaching retirement, taking a little less risk with some of your pot can make sense, as you may soon need to draw on your savings and will have less time to recover from any market falls. In that context, increasing exposure to assets such as bonds can help provide more stability.

For those with a longer investment horizon, the picture is different. Short-term market movements, and the stories that drive them, tend to matter much less over time.

Making knee-jerk changes in response to current headlines can sometimes have a greater negative impact in the long run than staying invested through periods of uncertainty.

Holding a mix of assets remains an important part of this. Bonds and cash can behave differently to equities at times of volatility and may help smooth returns, but the right balance will depend on your own plans and comfort with risk.

Savings rates will fluctuate depending on what is happening with interest rates – they are currently at 3.75 per cent with some savings rates offering as much as 5 per cent.

But investments could well outdo this over the longer period, depending on where your money is placed and what happens in the markets.

Ultimately, while the questions around AI are understandable, they are best viewed through the lens of your wider financial plan. Staying diversified, focusing on long-term goals, and resisting the urge to make reactive decisions remains one of the most reliable ways to navigate uncertain markets.